10 things credit bureaus won’t say

They’ve got your number. And they’re not afraid to use it

By

AnnaMariaAndriotis

Dave Whamond

1. “We track a lot more than just your credit.”

Credit bureaus are well known for tracking consumers’ credit history, including tabulating such details as whether they pay their bills on time and how much debt they carry. And as evidenced by the recent case of Julie Miller, who was awarded $18 million after she sued Equifax — one of the three main credit reporting bureaus — for failing to correct major mistakes in her credit report, the information they compile can sometimes be riddled with errors.

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But the bureaus also maintain information that has nothing to do with credit, from consumers’ home addresses to their employment records. While that data isn’t used to calculate credit scores, lenders can access this personal information and use it to help evaluate borrowers who are applying for credit — even to justify denying them a loan altogether. Individuals who change addresses often, for instance, may be presumed less financially stable and harder to track down if unpaid debts ever need to be collected, says Louis Hyman, a consumer-credit historian and assistant professor at Cornell University. Similarly, those who change jobs every few months could be viewed as more likely to miss payments, he says.

The credit bureau industry says it needs this identifying information to develop accurate credit report databases. Norm Magnuson, a spokesman for the Consumer Data Industry Association, which represents credit bureaus, says storing consumers’ addresses helps bureaus identify the correct credit report to give lenders when a consumer applies for credit. (Questions to the three main bureaus about industry practices were directed to the CDIA.) Social Security numbers by themselves often won’t suffice, he says, because some consumers apply for credit without providing that information. He says the CDIA cannot speak to such lender underwriting practices though they are regulated by laws that protect consumers.

Consumers’ salary information can also be up for grabs. Equifax, one of the three national credit bureaus, maintains a private database of salary records on more than 33% of U.S. adults — information it acquired when it purchased a data-mining company in 2007 — and it can sell this data to eligible lenders, including mortgage and car finance companies, that are trying to gauge a consumer’s ability to repay a loan. This year, seven members of Congress sent a letter to Equifax asking for proof that its subsidiary isn’t breaking laws that protect personal privacy. (The other two major bureaus, Experian and TransUnion, say they don’t collect salary information.)

Timothy Klein, a spokesman for Equifax, says the company provides salary information only when permissible under the Fair Credit Reporting Act, which went into effect in 1970 and regulates how consumer information can be distributed. A company statement to congressional members stated that it’s in “compliance with all applicable consumer protection laws.” Also, he says, the company will only provide this data to lenders if the consumers first agree to it.

Lenders have to ask consumers for permission to verify their employment or income, typically by including language authorizing that disclosure in the loan application, says Klein. If the consumer declines, he says, it’s up to the lender to determine whether to offer a loan without income information.

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